Government proposes several amendments to Act on Unemployment Security to increase employment
The Government has submitted to Parliament a proposal aimed at reforming unemployment security to provide more incentives for work. The proposed amendments concern the prior work requirement for an employee to be entitled to unemployment benefit, the adjusted unemployment benefit, the starting date of the right to receive unemployment benefit, and the child increments to unemployment benefits.
Employees may be entitled to unemployment allowance if they meet the prior work requirement. Currently, the fulfilment of the prior work requirement is determined based on calendar weeks. The main rule is that a minimum of 18 hours of work in a calendar week counts towards the prior work requirement. The Government proposes that, in future, the prior work requirement be determined on the basis of income from paid work. The change would mean that the prior work requirement would, as a rule, be accumulated on the basis of earned income.
The prior work requirement would be extended so that, in future, employees would be required to have worked for 12 months in order to meet the prior work requirement. A work requirement month would, as a rule, mean a calendar month during which the earned income before withholding tax would be at least EUR 930 per month. Periods of 0.5 months would also count towards the prior work requirement. Employment would not have to be continuous to count towards the prior work requirement, but the length of the review period would continue to be 28 months. It would also continue to be possible to extend the review period on acceptable grounds.
The provisions on earnings-related unemployment allowance would be amended as necessary due to the changes in the prior work requirement. As a result of the changes, the earnings-related unemployment allowance would in future better correspond to the person’s actual earnings-based income level before the amount of earnings-related unemployment allowance is calculated.
Changes to the exempt amount of unemployment benefit, the waiting period and the increments based on the number of children
It is proposed that the exempt amount of the adjusted unemployment benefit would be abolished. The exempt amount means the portion of income that is not taken into account when calculating the amount of adjusted unemployment benefit. Currently, the exempt amount is EUR 300 for a one-month period of adjusted unemployment benefit and EUR 279 for a period of adjusted unemployment benefit consisting of four consecutive calendar weeks. After the abolishment of the exempt amount, the adjusted unemployment benefit would be calculated so that half of all gross income earned would reduce the unemployment benefit paid to the unemployed person in its entirety.
According to the proposal, the waiting period before qualifying for unemployment benefit would be restored from five days to seven days. Thus, in future, unemployed people would become eligible for unemployment benefit following a seven-day waiting period. The proposal would also restore the phasing of holiday compensation paid at the end of a full-time employment relationship lasting for over two weeks. This would mean that no unemployment benefit would be paid for the period over which the holiday compensation is phased. The phasing of holiday compensation means that the holiday compensation received from paid work is divided by the average daily pay from work.
It is also proposed that the child increments to unemployment benefit be abolished. The abolition of the increments would cause changes to the amount of the commuting and relocation allowance and to certain provisions on the funding of unemployment benefits.
The changes concerning the abolition of the exempt amount of the adjusted unemployment benefit and the abolition of the child increments to this benefit would increase the similarity of unemployment security between the unemployment benefit and other benefits aimed to guarantee income security, because benefits paid under the Health Insurance Act, for example, do not include child increments or the above-mentioned exempt amounts.
Changes aim to simplify unemployment security system
The purpose of the proposed measures is to simplify and clarify the unemployment security system, to increase employment by improving incentives for employment and to strengthen general government finances. The proposed measures are also a step towards universal credit under the Government Programme.
The changes are expected to increase employment by over 200,000 people. According to an estimate by the Ministry of Finance, this would strengthen general government finances by approximately EUR 550 million. The changes would also have a direct impact on unemployment benefit expenditure, which would strengthen general government finances by about EUR 250 million. With these changes, it would be possible to improve general government finances by approximately EUR 800 million in total.
The amendments concerning the extension of the waiting period and the phasing of holiday compensation would enter into force on 1 January 2024. The abolishment of the child increments and the exempt amount of the adjusted unemployment benefit would enter into force on 1 April 2024. The amendments concerning the prior work requirement for employees would enter into force on 2 September 2024.
Inquiries
Liisa Siika-aho, Director General, Ministry of Social Affairs and Health, tel. +358 295 163 085, firstname.lastname@gov.fi
Marjaana Maisonlahti, Senior Ministerial Adviser, Ministry of Social Affairs and Health, tel. +358 295 163 288, firstname.lastname@gov.fi
Veera Svahn, Special Adviser to the Minister of Employment, Ministry of Economic Affairs and Employment, tel. +358 295 047 321, firstname.lastname@gov.fi